Question

During the first month of operations, a manufacturer incurs the following costs related to activities within its factory:
Direct materials $15,000
Direct Labor $30,000
Manufacturing overhead $40,000
What amount should be reported as cost of goods sold on the income statement if 5,000 units are produced and 4,000 are sold?

Answer 1

Answer:

$68,000

Explanation:

The costs of goods sold  ( COGS)is calculated as follows.

COGS = opening stock + Purchases - Closing stock

This was the first month of operation; hence there was opening stock.

The material used to produce 5000 units were

Direct materials $15,000 +  Direct Labor $30,000 + Manufacturing overhead $40,000 = $85,000

The cost per units = $85,000 /5000 units

=$17 per units

4000 units were sold, the COGS

=$17 x 4000

=$68,000